GBP/USD Daily Forecast – Sterling at Weekly Lows Ahead of US GDP

GBP/USD Rally Above 1.2500 Fails Once Again

GBP/USD made another attempt to scale above the psychological 1.2500 handle yesterday but could not hold the gains. The pair saw some sharp selling from the level, aided by volatility as a result of the ECB meeting that took place around that time.

The pair appears to be trading at the lower end of a range that has been taking place in the week thus far. A potential catalyst for a range break is the release of Advance GDP out of the United States later today.

The Fed will use the data release in making its decision on how to act at their meeting next week. Although the markets have no doubt that a quarter-point rate is coming and have fully priced one in.

Analysts are looking for 1.8% growth in the US economy for the second quarter. This is a sharp contrast to the final revised reading of 3.1% in the first quarter.

Technical Analysis

Although Sterling has been the weakest major currency throughout the month of July, selling pressure has eased considerably this week. In fact, the currency is the second strongest among the majors in the week thus far.

But as I’ve mentioned in prior forecasts, I don’t think there is a reason for bulls to get excited here. It will take a sustained break above 1.2500 handle to encourage buyers. So far, two attempts this week have failed. Now, a declining trendline has come into play to offer even further resistance near the psychological level. The trendline can be seen in the chart above and originates from this month’s high.

To the downside, the pair has been supported on dips to 1.2426. If it falls below this level, I think it will confirm a continuation of the prior downtrend. Although there is some further support at 1.2400/1.2406.

Bottom Line

• Advance GDP figures will be released out of the United States later today. Volatility is expected and could break GBP/USD out of the current range.
• Overhead resistance at 1.2500 has strengthened as a declining trendline from mid-month highs has converged towards it.
• Support for the pair is found at 1.2426 followed by 1.2400.